Your credit reports – you have three of them – contain a snapshot of your financial history, how you’ve handled debt and whether you’ve paid your bills on time. These reports matter: The information in them form the basis of your three-digit credit score. And a high or low credit score helps determine whether you qualify for loans and credit cards and at how high of an interest rate. 

It’s important, then, to check your credit reports regularly, and to study the financial information they hold. Certain incorrect information could signal that you may be a victim of identity theft. Fortunately, accessing your credit reports is easy. And understanding the information they hold isn’t complicated, either. 

Here’s a closer look at credit reports, the information you’ll find on them and why they matter. 

Why your credit reports matter

You have three credit reports, one each maintained by the national credit bureaus of Experian, Equifax, and TransUnion. You can order free copies of each of your credit reports from AnnualCreditReport.com. And you should do this, checking all three of your reports at least once a year.

What’s on your reports? First, they list your personal and financial information. This includes your name, address, birthdate, previous addresses, and Social Security number.

It also lists any recent public records filed against you, including any bankruptcies you filed in the last seven or 10 years and any foreclosures filed against you during the last seven years.

Finally, your reports list your open credit card accounts and loans. This section lists the balances of your loans and credit cards, the credit limits of your credit cards and any late payments in the last seven years.

This information matters because it’s what makes up your three-digit credit score. And these scores are important when you are applying for new loans or credit cards.

Lenders study these scores, and your reports, when deciding who qualifies for a loan or new credit. If your score is too low, you’ll struggle to qualify for new credit cards or mortgage, auto, student, or personal loans.

And if you do qualify with a low score, you’ll be hit with higher interest rates. In general, the lower your credit score, the higher the interest rates that come with any loans or credit cards for which you qualify. 

What should your credit score be? That varies, but most lenders consider a FICO credit score — the one that lenders use when determining who qualifies for mortgage loans — of 740 or higher to be very good. FICO scores of 800 or better are considered excellent. But if your FICO score is lower than 620? You’ll struggle to qualify for a mortgage. 

Building stronger credit reports (and credit scores)

Fortunately, it’s relatively simple to improve the information on your credit reports and build a stronger credit score. 

• Pay all your bills on time each month: Credit card providers and lenders report your on-time payments to the national credit bureaus for several monthly bills. This includes your mortgage, student loan, auto loan, personal loan, and credit card payments. If you pay these bills on time, your score will steadily rise. But if you make a payment late — 30 days or more past your due date — your creditors and lenders will report that, too. A single late payment can cause your credit score to drop by 100 points or more.
• Pay down your credit card debt: Your credit score will take a hit if you are using too much of your available credit. There is no set formula for how much of your credit you should be using at any one time. It’s best, then, to pay down as much of your credit card debt as possible. Your best move is to pay off your entire credit card bill by each due date. 
• Only apply for new credit when you need it: Every time you apply for a new credit card or loan, lenders will check your credit. These credit inquiries cause your credit score to fall slightly. If you rack up too many of them, your score could drop. Having too many open credit card accounts could cause your score to dip, too.
• Check your credit reports regularly: You should check all three of your credit reports at least once every year. Once you receive your reports, study them for any incorrect information, such as late payments you know you made on time or loan balances that seem too high. Correcting false information on your credit reports could give your credit score a quick boost.

How to get your three credit reports

The easiest way to get your credit reports is to order them from AnnualCreditReport.com. Usually, you can order one report from each of the three credit bureaus at no charge every year.During the COVID-19 pandemic, though, TransUnion, Experian, and Equifax are offering credit reports to consumers once a week for free. You can now order your three reports every week at no charge. The bureaus have not announced when or if they will return to offering one free report each year.

What if you find mistakes on your credit reports?

If you find an error on one of your credit reports — a missed payment that you know you made, for example — you should immediately contact the credit bureau behind the error to correct it. Removing inaccurate information can provide an immediate boost to your credit score.

To file a dispute with TransUnion, click here. For Experian, click here. And for Equifax, click here. The agency usually has 30 days to investigate the information, and the information must be removed from a file if the credit reporting agency cannot verify a mistake or correct the errors. The bureaus must notify you of the results of their investigations within five business days of completing them.

The FTC offers a sample dispute letter to help you with this process.